City of Berkeley

• The city of Berkeley, California is planning to go ahead with an Initial Coin Offering (ICO) for the city’s cryptocurrency, which does not have an official name yet. Even though the exact launch date is not known yet, it is expected to be launched in late 2019.
• The cryptocurrency will be backed by municipal bonds. The money raised by crowdfunding through the ICO will be used to fund city-issued municipal bonds.
• The funds generated by those bonds will be used to pay for affordable housing, homeless shelters, ambulances and street plantings.
• Owners of the coin will be able to spend the cryptocurrency in local businesses, and people are also considering using it as an apartment rent payment method.
• Mayor Jesse Arreguín and Vice Mayor Ben Bartlett are trying to make the municipal bonds more accessible to all citizens. This can be achieved through cryptocurrency, because bonds that are usually issued in denominations of at least $5,000 can be split into cryptocurrency tokens denominated in as little as a few dollars.
• Bartlett compared the proposal to a "non-profit, special-purpose vehicle, meant to fund social good".
• The system would work in such a way that the bonds would be sold directly to citizens via the cryptocurrency tokens. This would mean that underwriters would be excluded from the transaction and the total transaction costs would be reduced.
• While the cryptocurrency is still in the approval stages, implementing it could result in a way for one of the so-called "sanctuary cities" to continue to receive funding for homeless shelters and affordable housing even after restrictive funding measures proposed by the Trump administration are implemented.
• Funding affordable housing is especially important, since that type of funding has already been undermined by the implemented tax cuts.

Dubai

• The official credit bureau of the United Arab Emirates, emcredit, run by the Dubai Department of Economic Development, announced in 2018 that it will launch emCash, a city cryptocurrency, some time in 2019.
• Dubai citizens will be able to use emCash for "retail payments in-store, to pay for government utilities, telecommunication, and school fees in government shopfronts", the official press release stated.
• emcredit partnered with Pundi X, and Ebooc Fintech & Loyalty Labs to deliver digital payments to its citizens.
• Pundi X has already started supplying digital payments devices called xPOS to retailers across Dubai. The devices will also be installed in offices of the government.
• Dubai residents use the digital currency via a smartphone app emPay which communicates with xPOS devices.
• "To be the world's first city to offer blockchain-based payment solutions to our residents is an exciting moment for Dubai. It confirms Dubai's status as an international tech hub. Deploying cutting-edge technology such as blockchain is a key priority and is delivering benefits to our citizens in the form of convenience and securities to customers and merchants across Dubai," a spokesperson for emcredit said.
• Additionally, in 2017, the Smart Dubai office, a government initiative led by the Crown Prince of Dubai, has approved a "citywide blockchain payments platform" that will connect all 38 government entities to increase the efficiency and transparency of the government.
• Experts expect that emCash and the government blockchain payments platform will be integrated in some way in the future.
• The initiative is still in its early stages and it still did not produce concrete results. In fact, the Dubai Telecommunications Regulatory Authority gave the final approval for the installation of xPOS devices as recently as May 1, 2019. The devices can now officially be connected to a blockchain network and used for processing payments.

Lafayette Parish

• Lafayette Mayor-President Joel Robideaux proposed early last year that the parish create a "Bitcoin-like" cryptocurrency.
• Robideaux described the parish as a technological hub that would benefit from attracting people interested in emerging technologies like blockchain and cryptocurrency.
• The proceeds of the cryptocurrency ICO would be used to "build a living lab of blockchain researchers and developers," according to Robideaux.
• Even though the announcement attracted a lot of interest at the moment, the initiative has never been mentioned in the media since then.

Innisfil and Ohio

• In April 2019, the Town of Innisfil, Canada started accepting Bitcoin for property tax payments as part of a one-year pilot program.
• The town partnered with Coinberry, that created a cryptocurrency payment processing solution called Coinberry Pay.
• Coinberry will handle the payments and instantly convert them to Canadian dollars which will then be transferred to the municipality.
• "There’s no doubt that cryptocurrency is growing in usage and popularity. By getting into this now, we are making sure our municipality is ahead of the game, and signaling to the world that we truly are a future-ready and innovative community,"Innisfil mayor Lynn Dollin said.
• Similarly, Ohio became the first US state to accept Bitcoin for tax payments.
• Ohio partnered with Bitcoin payment processor BitPay that will convert Bitcoin to dollars and then transfer them to Ohio, exactly like Coinberry.

Prague and Buenos Aires

• Prague and Buenos Aires are considered to be the most crypto-friendly cities in the world.
• The two cities have the most vendors that accept Bitcoin in the world. Prague has 147 businesses that accept Bitcoin payments, while Buenos Aires has 141.
• Trailing the two cities are San Francisco (117), Madrid (101) and New York City (101).

Cryptocurrency

• Cryptocurrencies are digital currencies that rely on cryptography for security.
• Complex cryptographic protocols ensure that cryptocurrencies are practically impossible to counterfeit. The successful counterfeiting of cryptocurrencies would require solving mathematical problems that the world’s most powerful computers would take decades to solve.
• Most cryptocurrencies rely on blockchain technology for record-keeping.
• Blockchain is a distributed, decentralized, public ledger that is maintained by a disparate network of computers.
• Cryptocurrencies owe their features of immutability and transparency to Blockchain, or other Distributed Ledger Technology (DLT).
• Cryptocurrencies often have a limited supply that is predetermined by a mathematical formula. They are also often open-source, which means everyone can read their code and know the “rules of the game” upfront.
• This, and the fact that increasing the supply usually involves a lot of computing power (electricity) is what makes cryptocurrencies scarce and, therefore, desirable.
• The predictable, scarce supply coupled with transparency is what gives users confidence in the value of cryptocurrencies. Ultimately, though, cryptocurrencies are most often backed by nothing more than the faith of their users, exactly like fiat money.

Bitcoin

• Bitcoin, created at the start of 2009 in the aftermath of the financial crisis, is the world’s first blockchain-based cryptocurrency.
• Bitcoin is the world’s first digital currency to solve the double-spending problem. This was the first time that something completely digital was also unique and uncopyable. This is how the invention of Bitcoin introduced the property of scarcity to the digital world.

Municipal cryptocurrencies

• A municipal, or civic, cryptocurrency is essentially any cryptocurrency issued (coded) by a municipality like a city.
• Unlike most standard cryptocurrencies which are backed by faith, municipal cryptocurrencies are likely backed by some city asset.
• Cities are creating cryptocurrencies for a variety of reasons. Some, like certain cities in Sweden, are aiming for a cashless society and see cryptocurrencies as a way to achieve that. Others, like Dubai, want to make the government more efficient and the budgeting of funds more transparent through cryptocurrencies.
• However, most often cities are using cryptocurrencies to open up new ways for citizens to invest in them. This helps cities raise funding for projects that previously could not have been afforded.
• Cities are using civic cryptocurrencies to fund infrastructure projects, to fund welfare programs, to encourage local spending and the local economy and to enahance the efficiency of the government.
• Cryptocurrency is issued to citizens when they buy municipal tokens. The local government receives the funds for various projects, while the citizens receive tokens which can then be spent at local businesses.

Benefits of municipal cryptocurrencies

• The previously mentioned transparency of cryptocurrencies is a major benefit for any organization that needs to raise funds from the public. People have much more confidence in giving money to causes that can clearly show how that money is being used.
• Cryptocurrency can also make investments such as municipal bonds more accessible to a wider group of investors. Normally, municipal bonds are issued at thousands, or even millions of dollars. By converting them into tokens, cities can lower the barrier to entry to as little as a few cents.
• “If you tokenize these bonds, then it’s possible for the average person to make a small investment,” Campbell Harvey, a cryptocurrency professor at Duke University, stated.
• Cryptocurrencies inherently support transactions between peers and cutting out middlemen can go a long way towards reducing the administrative burden of fundraising for a local government.

Drawbacks of municipal cryptocurrencies

• One of the major drawbacks of creating municipal cryptocurrencies is the possibility of creating a financial bubble. Like with any new investment vehicle, there is a possibility that investors will be attracted by the novelty of municipal cryptocurrencies, but that they will quickly lose interest once the novelty has worn off.
• Sheila Warren, project head of blockchain and distributed ledger technologies at the World Economic Forum, warned that there is a risk of financial panics arising out of municipal cryptocurrencies. Cities should implement safeguards used by traditional financial institutions to keep panics from occurring.
• There is a cybersecurity risk associated with cryptocurrencies. If cities do not set up their municipal cryptocurrencies in the right way and make them secure, there is a possibility that they will be hacked.
• “There’s a lot of variables here in terms of how [cities] set up their blockchain, but essentially think of somebody going in and stealing the tokens, creating transactions for residents who don’t know their tokens are being taken, and then dumped,” Harvey stated.
• Another drawback is that cities need to help their citizens trust cryptocurrencies. While some citizens might be attracted by the novel idea, others might be put off by the unexplored territory.
• The new investment model of municipal cryptocurrencies could increase wealth inequality in cities. Paradoxically, funding projects that help struggling communities creates wealth for the wealthy.
• “Over time, we have to think about what it means if we’re really creating and adding to stratification of society through the processes we’re using to alleviate those issues,” Warren stated.
• Municipal cryptocurrencies can also exacerbate the inequality between cities, because cities with advanced technological and financial industries are better positioned to experiment with civic cryptocurrencies. Since those cities tend to already be wealthy, further innovation will tend to widen the gap between them and their smaller counterparts.

Bay Bucks

•  Bay Bucks are the local currency of Traverse City, Michigan.
• The currency was founded in 2005, and, while it initially enjoyed some degree of success, it has fallen out of fashion and, while technically still active, is now largely defunct.
• Bay Bucks were founded to promote and encourage participation in the local economy as well as to attempt to insulate it from the ups and downs of the national economy, "in addition to being fun."
• Bay Bucks are in denominations of 1, 5, 10, and 20, and are tied to (and directly exchangeable with) the US dollar.
• The currency can be utilized "exclusively at participating Traverse City businesses, with the goal of keeping money within the community and stimulating the local economy."
• The way participating businesses have interacted with Bay Bucks varies: some allow Bay Bucks to be used for any purchase at any time, while others only accept them on a certain day of the week; and some use them to pay employees, with employees' permission.
• Participating businesses use Bay Bucks for petty cash, as banks do not accept deposits in the local currency.
• While Bay Bucks have declined in popularity, a new initiative is seeking to create a digital version of Bay Bucks, which its proponents believe will be more successful due to a general preference for cashless (e.g. credit card) purchases.

Ithaca Hours

• Founded in 1991 by Paul Glover, Ithaca Hours of Ithaca, New York are generally considered the first modern local currency of their kind, inspiring others across the country.
• Glover founded Ithaca Hours with the hopes of invigorating local businesses by keeping currency in the community, as well as shielding the community from the volatile global economy.
• The "hour" name comes from the currency's value: it is equal to 10 US dollars, the average hourly wage in Ithaca at the time, and could one Ithaca Hour could, in theory, be used in exchange for an hour of labor, such as babysitting services or odd jobs.
• Ithaca Hours were highly successful in the mid- to late-1990s, but in the early 2000s their use declined, and, like Bay Bucks, they are still technically active but are mostly consigned to irrelevance (especially because Glover, their founder and main proponent, moved away from Ithaca).
• As mentioned above, Ithaca Hours could be used to pay for an hour of labor, but were also widely adopted by local merchants to purchase goods.
• Ithaca Hours come in five denominations: "2 Hour, 1 Hour, ½ Hour, ¼ Hour, 1/8 Hour." It is backed "only by its acceptance within the local community."
• In another similarity to Bay Bucks, there has been a recent effort to resurrect local Ithaca currency in digital form, though in this case the new digital currency is called "Ithaca Dollars," founded by a company called Ithacash.

Berkshares

• Founded in 2006, Berkshares are the local currency of The Berkshires in Massachusetts. The Berkshires is a region encompassing several towns, and BerkShares can be used in any participating business within them.
• BerkShares were first established to "serve as a tool for community economic empowerment, and development toward regional self-reliance," principally by maximizing "the circulation of goods, services, and capital" within the Berkshire region.
• One BerkShare is the equivalent of one US dollar, and while the currency has achieved buy-in from local banks (a feat that other local currencies like Bay Bucks never achieved), the exchange rate at participating banks is 95 cents per BerkShare, giving consumers "a small bonus" for exchanging dollars into BerkShares while discouraging them from exchanging BerkShares into dollars.
• BerkShares are more successful than the two case studies discussed above, as they are still widely in circulation and utilized by an impressive total of about 400 businesses. Also, as mentioned above, consumers can exchange dollars for BerkShares at many local banks, such as Adams Community Bank, increasing accessibility and incentive to use the local currency.

Your research team employed the following strategy: